Preview of new US stocks | Market expectations for optical modules are beginning to diverge, can Baotuo Vision (BLTG.US) "seize the market opportunity" and capture market dividends?

In recent days, the divergent attitudes of Goldman Sachs and Morgan Stanley, two major investment banks, towards the optical module industry have once again sparked fervent discussions in the market. On October 14, Goldman Sachs released a research report on optical modules, focusing on two Chinese optical module companies, Zhongji Innolight and Suzhou TFC Optical Communication. Goldman Sachs gave both companies a buy rating and raised the target price for Zhongji Innolight from 442 yuan to 470 yuan in 12 months, and raised the target price for Suzhou TFC Optical Communication from 398 yuan to 450 yuan in 12 months. Morgan Stanley, on the other hand, in its latest research report released afterwards, stated that after a significant rise in the past few months, the fundamental bullishness of the optical module industry has been largely priced into the stock prices. In line with this logic, it adjusted the ratings of several optical module-related stocks, with Eoptolink Technology Inc. even being downgraded to hold. At a time when the two major investment banks have different opinions on the trend of the optical module industry, the Hong Kong-listed Cig Shanghai IPO has once again added fuel to this hot track. In contrast, Baite Vision, which went against the market trend to the U.S. amid the U.S. government shutdown, seems to be hiding in the increasingly noisy market. Optical module developer, but focused on the VR/AR track On October 10, after submitting its confidential filing to the U.S. SEC on March 14, Baite Vision publicly filed for an IPO on the Nasdaq in the United States under the ticker symbol "BLTG." As a domestic optical display technology company, Baite Vision specializes in the design, development, and sales of optical display modules and complete optical display products. According to the prospectus, Baite Vision is a company in the upstream of the industrial chain, not only providing customers with product design and contract manufacturing services for optical display modules, but also offering solutions in the optical display field according to customer needs. With its independently developed proprietary technology, it can also provide customers with one-stop services to meet the needs of multiple industries, including consumer electronics. In short, Baite Vision's business model is to outsource the production of products to third-party original equipment manufacturers (OEMs), who produce products according to Baite Vision's design specifications, and then Baite Vision generates revenue through the sale of these products. In terms of product matrix, Baite Vision's core business is closely aligned with emerging industries such as VR/AR and consumer electronics, covering products such as VR headsets, Pancake optical engines with eye tracking functionality, and optical products for AR and MR. This industry is not entirely the same as the currently hot optical module industry. It is understood that optical modules are optical devices used for high-speed data transmission, which serve to convert optical signals and electrical signals to facilitate data transmission in communication networks. The upstream of the optical module industry chain includes optical chips and electrical chips, optical devices/optical components, and the downstream applications are mainly divided into two major areas: telecommunications represented by 4G/5G wireless networks, fixed broadband FTTX, transmission, and data communication networks; and data center fields for applications such as AR/VR, artificial intelligence, and metaverses. Therefore, the track where Baite Vision is located belongs to the end industry of the upstream optical module industry chain, and it mainly benefits from the continuous rise in the concept of metaverses and the market dividend of accelerated iteration of consumer electronics terminals. In terms of the market, the size of China's visual artificial intelligence industry in 2024 has reached 234 billion yuan, an 18.6% year-on-year increase, with core increments contributed by emerging applications such as VR/AR. The IDC report further points out that the computer vision application market is expanding from traditional security to fields such as metaverses, and autonomous driving, with a year-on-year growth rate of 21.2% by 2024. From the perspective of regional industrial layout, the Yangtze River Delta region where Baite Vision is located (Shanghai, Hangzhou, Nanjing) accounts for 19.7% of the national visual AI market share, providing the company with a natural advantage due to its well-developed industrial chain and reserve of technical talents. Especially in the VR optics field, with the continuous growth in shipments of consumer-grade headsets, optical display module suppliers with customization capabilities have entered a period of explosive capacity and revenue. In addition, with regard to the company's continuous expansion into the electronic paper industry, the prospectus shows that the color electronic paper display market is transitioning from monochrome to color solutions, with the global penetration rate of color electronic paper expected to increase from 10% in 2024 to 49% in 2028, and China's penetration rate of color electronic paper expected to increase from 13% in 2024 to 51% in 2028. Achieving high growth from industry dividends, opportunities and risks coexist As mentioned earlier, as one of the few domestic companies with the capability of scale production of VR optical modules, Baite Vision has been deeply affected by the explosive growth of the VR/AR industry in recent years, and this impact is directly reflected in the company's financial statements. Data shows that in the fiscal years 2024-2025, the company's revenue surged from $10.92 million to $26.2 million, an impressive increase of 139.9%; at the same time, the company's gross profit also increased from $0.616 million to $1.721 million, a year-on-year increase of 179.3%. Behind the high growth in performance lies the stable supply and sales structure of the company and its technical support. It is understood that in terms of the supply and sales structure, Baite Vision's customers are highly concentrated. In the 2025 fiscal year, sales revenue from the top three customers accounted for approximately 95.2% of its total revenue. The prospectus shows that Baite Vision's customers include PICO and DaPeng VR, with PICO, a subsidiary of Byte, being the company's largest customer. In addition, in the 2025 fiscal year, purchases from the top two suppliers accounted for approximately 89.7% of Baite Vision's total purchases, with purchases from the largest supplier, Wuxi Sharp, accounting for 63.6%. Its stable supply and sales structure is supported by core technological capabilities. The prospectus shows that Baite Vision's research and development of high-end optical zoom lenses is at a leading level in China, and its self-built VR and electronic laboratories are equipped with professional testing systems such as DASS from Germany and LMS-VR from the United States, which can quickly provide customized optical solutions. Its core product, the optical display module, has a field of view angle of 40, a transparency rate exceeding 85%, and key performance indicators that benchmark against international first-line levels. However, due to the company's business model, Baite Vision is still in a loss-making state. Data shows that in the fiscal years 2024 and 2025, the company recorded net losses of $1.69 million and $1.79 million respectively. The main reason behind the consecutive losses is the increase in income costs that have grown in parallel with revenue growth. Although the company's income increased by an impressive 139.9% year-on-year in the 2025 fiscal year, income costs for the same period increased from $10.3 million in the previous year to $24.48 million, an increase of 137.5%. Further breakdown of the cost structure reveals that in the 2025 fiscal year, the company's research and development investment reached $1.635 million, an increase of 65.1% year-on-year, with a research and development expense ratio close to 6.2%. In addition, the company's current operating expenses increased by 125% year-on-year in the current period, indicating that there is still room for improvement in its expense control efficiency, which indirectly suggests that the company's new business development and research and development investment may further increase short-term profit pressure. However, in terms of valuation, if calculated at the midpoint price of $5 issued, Baite Vision's current PS valuation is only about 6.5 times, significantly lower than the average PS level of nearly 22 times of domestic industry companies, highlighting a safety margin in valuation. Given the current prosperity of the optical module market and the preference of the U.S. stock market for positively profitable companies, Baite Vision is expected to receive more favor from investors in the U.S. market if it can turn losses into profits in the future.